UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 11-K
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 30, 2003
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to ______
Commission file number 000-13818
BANCO POPULAR DE PUERTO RICO SAVINGS AND STOCK PLAN
(formerly "Banco Popular de Puerto Rico Employees Stock Plan (Puerto Rico)"
(Full title of the Plan and address of the Plan, if
different from that of the issuer named below)
POPULAR, INC.
209 MUNOZ RIVERA AVENUE
HATO REY, PUERTO RICO 00918
(Name of issuer of the securities held pursuant to the
plan and the address of principal executive office)
BANCO POPULAR DE PUERTO RICO
SAVINGS AND STOCK PLAN
FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULE
DECEMBER 30, 2003 AND 2002
BANCO POPULAR DE PUERTO RICO SAVINGS AND STOCK PLAN
FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULE
INDEX
PAGE(s)
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM..................... 1
FINANCIAL STATEMENTS
Statement of Net Assets Available for Benefits as of
December 30, 2003 and 2002.................................................. 2
Statement of Changes in Net Assets Available for Benefits
for the fiscal year ended December 30, 2003................................. 3
Notes to Financial Statements............................................... 4-8
SUPPLEMENTAL SCHEDULE
Schedule I - Schedule of Assets (Held at End of Year)
at December 30, 2003....................................................... 9
* Other schedules required by Section 2520.103-10 of the Department of
Labor's Rules and Regulations for Reporting and Disclosure under ERISA
have been omitted because they are not applicable.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Participants and Administrator of
Banco Popular de Puerto Rico
Savings and Stock Plan
In our opinion, the accompanying statements of net assets available for benefits
and the related statement of changes in net assets available for benefits
present fairly, in all material respects, the net assets available for benefits
of the Banco Popular de Puerto Rico Savings and Stock Plan (the "Plan"), at
December 30, 2003 and 2002, and the changes in net assets available for benefits
for the fiscal year ended December 30, 2003, in conformity with accounting
principles generally accepted in the United States of America. These financial
statements are the responsibility of the Plan's management. Our responsibility
is to express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental Schedule of Assets (Held
at End of Year) is presented for the purpose of additional analysis and is not a
required part of the basic financial statements but is supplementary information
required by the Department of Labor's Rules and Regulations for Reporting and
Disclosure under the Employee Retirement Income Security Act of 1974. This
supplemental schedule is the responsibility of the Plan's management. The
supplemental schedule has been subjected to the auditing procedures applied in
the audit of the basic financial statements and, in our opinion, is fairly
stated in all material respects in relation to the basic financial statements
taken as a whole.
/s/PricewaterhouseCoopers LLP
San Juan, Puerto Rico
June 18, 2004
1
BANCO POPULAR DE PUERTO RICO SAVINGS AND STOCK PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 30, 2003 AND 2002
2003 2002
ASSETS
Investments at fair value $83,171,633 $59,032,266
Contribution receivable 212,656 -
Profit sharing contribution receivable 1,581,531 2,379,168
Dividends receivable and other 486,637 345,807
----------- -----------
85,452,457 61,757,241
Cash and cash equivalents 120,681 165,566
----------- -----------
Total assets $85,573,138 $61,922,807
LIABILITIES
Accounts payable $ 35,689 $ 24,409
----------- -----------
Total liabilities 35,689 24,409
----------- -----------
Net assets available for benefits $85,537,449 $61,898,398
=========== ===========
The accompanying notes are an integral part of these financial statements.
2
BANCO POPULAR DE PUERTO RICO SAVINGS AND STOCK PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE FISCAL YEAR ENDED DECEMBER 30, 2003
ADDITIONS TO NET ASSETS ATTRIBUTED TO
Investment income
Net appreciation in fair value of investments $21,074,759
Investment income 1,830,036
-----------
Total investment income 22,904,795
-----------
CONTRIBUTIONS
Employer 2,236,313
Participants 4,245,231
Rollovers from other qualified plans 43,473
-----------
Total contributions 6,525,017
-----------
Total additions 29,429,812
-----------
DEDUCTIONS FROM NET ASSETS ATTRIBUTED TO
Benefits paid to participants and withdrawals 5,790,761
-----------
Net increase 23,639,051
NET ASSETS AVAILABLE FOR BENEFITS
Beginning of year 61,898,398
-----------
End of year $85,537,449
===========
The accompanying notes are an integral part of these financial statements.
3
BANCO POPULAR DE PUERTO RICO SAVINGS AND STOCK PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 30, 2003 AND 2002
1. DESCRIPTION OF PLAN
The following description of the Banco Popular de Puerto Rico Savings and
Stock Plan (the "Plan"), formerly the "Banco Popular de Puerto Rico
Employees Stock Plan (Puerto Rico)", provides only general information.
Participants should refer to the Plan agreement for a more complete
description of its provisions.
GENERAL
The Plan is a defined contribution plan created for the purpose of
providing employees with a tax advantaged approach for saving money for
retirement. The Plan provides the participants the ability to acquire
investments in mutual funds, as well as share in the Bank's (the "Bank")
future through the purchase of Popular, Inc. (holding company of the Bank)
common stock. The Plan is subject to the provisions of the Employee
Retirement Income Security Act of 1974 ("ERISA") and covers substantially
all employees of the Bank who have three months of service, are age
eighteen or older, and are residents of the Commonwealth of Puerto Rico.
PARTICIPANT CONTRIBUTIONS
Plan participants may authorize the Bank to make pre-tax and after-tax
payroll deductions up to 10% of their monthly compensation, as defined in
the plan document. At no time may a participant's pre-tax contribution
exceed the lesser of 10% of compensation, as defined, or $8,000.
Participant contributions made up to January 31, 2001 and which have been
invested in the Popular, Inc. common stock remain invested in such option
until the participant has attained 50 years of age and has completed 10
years of service.
EMPLOYER CONTRIBUTIONS
The Bank makes two types of contributions: a) a discretionary contribution
based on the Bank's profitability and b) a matching contribution on the
basic compensation as defined in the plan document for those who elect to
contribute and invest in Popular Inc. common stock. The Plan sponsor
contributes to the plan on behalf of each participant, a matching
contribution equal to 50% of each participant's pre-tax contributions up
to a maximum of 2% of the participant's compensation invested in Popular,
Inc. common stock. After-tax contributions and participant pre-tax
contributions that are not invested in Popular, Inc. common stock are not
matched by the sponsor. A participant's share of any Bank contribution, is
to be invested solely in the Popular, Inc. common stock until such time as
he/she has attained 50 years of age and has completed 10 years of service.
At that time, a participant has full discretionary investment powers over
his/her account, including future plan sponsor contributions.
PARTICIPANT ACCOUNTS
Each participant account is credited with the participant's contribution
and allocations of (a) the Bank's matching and profit sharing
contribution, and (b) Plan earnings. Allocations are based on participant
earnings or account balances, as defined. Any dividends paid by Popular,
Inc. and mutual fund shares are reinvested in additional shares. The
benefit to which a participant is entitled is the benefit that can be
provided from the participant's vested account.
4
BANCO POPULAR DE PUERTO RICO SAVINGS AND STOCK PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 30, 2003 AND 2002
VESTING
Participants are vested immediately in their voluntary contribution plus
actual earnings thereon. Vesting in the Bank's matching and discretionary
contributions plus actual earnings thereon is based on years of service.
The Bank's contribution vest in accordance with the following schedule:
YEARS OF SERVICE VESTING %
Less than 1 0
At least 1 20
At least 2 40
At least 3 60
At least 4 80
5 or more 100
PAYMENT OF BENEFITS
Participants receive the vested portion of their individual accounts when
employment with the Bank ends. In service withdrawals are permitted, but
limited to after-tax contributions in the participant's account. Minimum
withdrawal is $1,000. Upon termination of service due to disability or
retirement, a participant may elect to receive an amount equal to the
value of the vested interest in his or her account as a lump sum
distribution in cash, shares of Popular, Inc. common stock, if applicable,
or a combination of both. In the case of participant termination because
of death, the entire vested amount is paid to the person or persons
legally entitled thereto.
PLAN EXPENSES AND ADMINISTRATION
The Bank is responsible for the general administration of the Plan and for
carrying out the provisions thereof.
Contributions are held and managed by a trustee appointed by the Board of
Directors of the Bank. All Banco Popular de Puerto Rico is the Trustee and
recordkeeper of the Plan. Banco Santander de Puerto Rico is the Trustee
for the investment in Popular, Inc. common stock. Expenses of the Plan are
borne by the Bank.
FORFEITED ACCOUNTS
Forfeited balances of terminated participants' nonvested accounts are used
to reduce future Bank contributions or, at the Bank's discretion
redistributed among participants after a five (5) year severance period.
During the severance period, if the terminated participant is reemployed
by the Bank, the dollar value at the date of reemployment of such
forfeited amounts shall be restored to the participant's account if the
reemployed participant repays to the Plan an amount equal to the dollar
amount of his/her vested balance distributed upon termination.
The Company used forfeitures amounting to $580,521 to reduce its profit
sharing contribution in 2003.
5
BANCO POPULAR DE PUERTO RICO SAVINGS AND STOCK PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 30, 2003 AND 2002
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING
The Plan's financial statements are prepared on the accrual basis of
accounting.
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
INVESTMENT VALUATION AND INCOME RECOGNITION
Plan investments are presented at fair value. Shares of registered
investment companies are presented at quoted market prices. Popular, Inc.
common stock is valued at its quoted market price. The Plan presents in
the statement of changes in net assets available for benefits the net
appreciation (depreciation) in the fair value of its investments which
consists of the realized gains or losses and the unrealized appreciation
(depreciation) on them.
Purchases and sales of securities are recorded on the trade date basis,
while dividends and interest earned are recorded on the accrual basis and
credited to each participant's account, as defined.
CONTRIBUTIONS
Employee and Bank contributions are recorded in the Plan year in which the
Bank makes the payroll deductions.
TRANSFER OF ASSETS TO OTHER PLANS
Terminated employees and retirees may elect to transfer their savings to
other plans qualified by the Puerto Rico Treasury Department.
PAYMENT OF BENEFITS
Benefits are recorded when paid.
3. INVESTMENTS
The following table presents the Plan's investments that represent five
percent or more of the Plan's assets at December 30:
2003 2002
# OF # OF
SHARES VALUE SHARES VALUE
Common stock
Popular, Inc.* 1,797,016 $ 81,045,428 1,718,145 $ 57,712,506
* includes non-participant directed portion
During 2003, the Plan's investments (including gains and losses on investments
bought and sold) appreciated in value as follows:
6
BANCO POPULAR DE PUERTO RICO SAVINGS AND STOCK PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 30, 2003 AND 2002
Mutal funds $ 211,415
Common stock - Popular, Inc. 20,863,344
--------------
$ 21,074,759
==============
4. NON-PARTICIPANT DIRECTED INVESTMENTS
Information about the net assets and the significant components of the
changes in assets relating to non-participant directed investments as of
December 30, is as follows:
2003 2002
Net asset
Popular, Inc. Common Stock $ 50,407,917 $ 40,377,107
YEAR ENDED
DECEMBER 30,
2003
Changes in net assets
Contributions $ 2,502,972
Dividends and interest 1,090,836
Net appreciation 12,864,439
Benefits paid to participants (1,940,658)
Transfers to participant directed investments
and other Plans under ERISA requirements (4,486,779)
--------------
$ 10,030,810
==============
Effective January 31, 2001, the plan was amended to require, among other
things, that participant investments in Popular, Inc. common stock up to
that date, are to remain invested until a participant attains 50 years of
age and 10 years of service. At that time, the participants will be
allowed to direct their investment balances to other investment options.
5. PROFIT SHARING CONTRIBUTION RECEIVABLE
The Board of Directors of the Bank approved profit sharing contributions
of $2,162,052 and $2,127,434 based on 2003 and 2002 Bank earnings,
respectively. The Company used in 2003 forfeitures amounting to
approximately $580,521 to reduce its profit sharing contributions. No
forfeitures were used to reduce the 2002 profit sharing contribution.
Amounts receivable were subsequently collected in February 2004 and
February 2003, respectively.
7
BANCO POPULAR DE PUERTO RICO SAVINGS AND STOCK PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 30, 2003 AND 2002
6. TAX STATUS
The Plan obtained a favorable determination letter from the Department of
Treasury of the Commonwealth of Puerto Rico. The letter dated January 28,
2002 indicates that the Plan is designed in accordance with the applicable
income tax law and is, therefore, exempt from income taxes. The Plan and
the income tax law have been amended since receiving the determination
letter. The Plan Administrator, based on the Plan's tax counsel's advice,
however, believe that the Plan is designed and is currently being operated
in compliance with the applicable requirements of the income tax law.
Therefore, no provision for income taxes has been included in the Plan's
financial statements.
7. PLAN TERMINATION
Although it has not expressed any intent to do so, the Bank has the right
under the Plan to discontinue its contributions at any time and to
terminate the Plan subject to the provisions of ERISA. In the event the
Plan terminates, the interest of each participating employee in the Plan
shall become fully vested and such termination shall not reduce the
interest of any participating employee or their beneficiaries accrued
under the Plan up to the date of such termination.
8. RISKS AND UNCERTAINTIES
The Plan's investments are exposed to various risks, such as interest
rate, market and credit risks. Due to the level of risk associated with
certain investments and the level of uncertainty related to changes in the
values of investments, it is at least reasonably possible that changes in
these factors in the near term would materially affect the amounts
reported in the statement of assets available for benefits and the
statement of changes in assets available for benefits.
8
SUPPLEMENTAL SCHEDULE
SCHEDULE I
BANCO POPULAR DE PUERTO RICO SAVINGS AND STOCK PLAN
SCHEDULE OF ASSETS (HELD AT END OF YEAR) AT DECEMBER 30, 2003
(SCHEDULE H, PART IV, LINE 4i ON FORM 5500)
DESCRIPTION OF CURRENT
IDENTITY OF ISSUE INVESTMENT SHARES COST VALUE
Dreyfus Emerging Leaders Fund Mutual Fund 4,729.436 *** $ 184,732
Federated Government Obligation Fund Mutual Fund 1,144,249.157 *** 1,144,249
Fidelity Advisor Equity Growth Fund Mutual Fund 3,135.313 *** 145,855
Fidelity Advisor Mid Cap Mutual Fund 2,427.062 *** 54,463
Federated Equity Income Fund Mutual Fund 4,458.154 *** 70,929
MFS Research International A Equity Fund Mutual Fund 2,703.809 *** 37,042
PIMCO Total Return Mutual Fund 13,797.544 *** 147,634
Scudder International Equity - IV Mutual Fund 1,503.297 *** 29,810
Van Kampen Common Stock Fund - A Mutual Fund 4,908.269 *** 78,189
Vanguard 500 Index Fund Mutual Fund 1,930.416 *** 197,791
Vanguard Total Bond Market Index Fund Mutual Fund 3,447.717 *** 35,511
Popular, Inc.* Common stock** 1,797,016.146 38,043,035 81,045,428
--------------- -----------
$ 38,043,035 $83,171,633
=============== ===========
* Party in-interest
** Includes non participant directed portion
*** Cost is not required for participant directed investments
SIGNATURE
Pursuant to the requirement of the Securities Exchange Act of 1934, the
persons who administer the employee benefit plan have duly caused this annual
report to be signed on its behalf by the undersigned hereunto duly authorized.
BANCO POPULAR DE PUERTO RICO
SAVINGS AND STOCK PLAN
----------------------------
(Name of Plan)
By: /s/ Jorge A. Junquera
-----------------------
Jorge A. Junquera
Authorized Representative
Dated: June 28, 2004